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What is your understand our political system operates? Maybe something like this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law are enforced by the courts. Simple as that. Yet, that was how it once functioned. Those days are over.

The Rise of Secret Arbitration Panels

In the modern era, overseas companies, and the oligarchs that control them, can sue nation states for the regulations they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are held behind closed doors. Differing from national judiciaries, these panels provide no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, or even businesses based in this country. They are open solely for corporations registered abroad.

Should an arbitration panel determines that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

This compensation represent not real financial harm but funds the arbitrators determine the company might otherwise have made. The state might be compelled to drop the legislation. It will be discouraged from enacting future policies of a similar nature, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being initiated, as companies take cues from each other, and investment funds finance suits for a share of a cut of the takings. The result? Sovereignty and democratic governance are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the decisions made by elected bodies is that this stipulation has been incorporated – without democratic mandate, and frequently under conditions of profound opacity – into international trade agreements.

A Specific Instance: The UK Coalmine

Twelve months ago, activists achieved a major legal triumph at the High Court. The judge ruled that schemes to excavate the first deep coalmine in the UK for three decades, in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine would have had no impact on climate commitments. The incoming administration later cancelled the permission the former government had issued. Currently, this legal outcome faces being overturned by an offshore tribunal answering to only the corporations filing the suit.

During August, a company whose final controllers are located in the tax haven initiated proceedings against the UK government. The previous week a tribunal in Washington DC was set up to consider the case.

The claimant is litigating against the UK for the revenue it might have made if the mine had been permitted to commence operations. We have no idea how much this sum represents. Which individual is acting on its behalf in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot Geoffrey Cox. The administration passes a law, the national judiciary supports it, then a overseas corporation disputes it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the mining lawsuit was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case so far, but it appears probable that he will utilise the tribunal to fight the penalties the UK imposed on him subsequent to the war in Ukraine. He has previously started suing a small nation on these grounds, demanding a colossal sum: an amount representing half state's annual revenue. Part of the lawyers on his side? Cherie Blair, married to the former British prime minister.

International law scholars contend that the EU’s delay in leveraging immobilised state funds as collateral for its financial support package stems from concerns within Belgium that it could be sued in the ISDS tribunals, under a trade agreement. This extraordinary, unaccountable authority over democratic administrations might be preventing the finance Ukraine critically depends on.

Misleading Claims and Growing Costs

We were assured that these scenarios could not occur. Years ago, a government leader, promoting the largest and riskiest of all these agreements, declared: “The UK has signed trade deal after trade deal and we have never seen a issue in the past.” An expert on this matter accused critics of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “once firms begin to understand the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were met with widespread derision.

That threat is now a reality. This year, oil and gas and resource corporations have filed a unprecedented number of cases against nations rich and poor, challenging – like the example of the Cumbrian coalmine – official measures to stop climate breakdown. Corporations have thus far won vast sums through ISDS, of which energy giants have secured $84bn. That equates to the combined GDP